A secure retirement and adequate retirement savings are targets many Americans can attain. That’s the conclusion that Prudential has reached, based on research by Boston College’s Center for Retirement Research. In its most recent National Retirement Risk Index, the center found that to maintain the standard of living they had before retirement, the average American household needs their 401(k) to provide 35% of income during retirement. The exact percentage varies by income level.
To accomplish that, if an individual begins saving for retirement at age 35 and does so for 30 years until retirement, the average household needs to have an annual savings rate of 14% of pre-tax income. Again, the exact rate varies by income.
Prudential finds much to be optimistic about in the center’s findings:
- If an employee begins saving before age 35 and delays retirement until after age 65, he or she will have even better prospects of having a financially secure retirement if savings during working years is adequate.
- Many employers match employee contributions to their 401(k)s, at least in part, which heightens the prospects of a financially secure retirement.
- The 401(k) has been greatly enhanced since it was launched in 1978.
Prudential contends that these results highlight the significance of access to 401(k) plans and argues that automatic enrollment and increases in contributions, as well as the employer match, make 401(k) plans — and access to them — even more important.
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